Bruce Schneier today compliments Google on trying out pay-to-perform ads as a means around click-fraud, but worries that this is risky because you become a partner with the advertiser. If their product doesn’t sell, you don’t make money.
And that’s a reasonable fear for any small site accepting pay-to-perform ads. If the product isn’t very good, you aren’t going to get a cut of much. Many affiliate programs really perform poorly for the site, though a few rare ones do well.
However, Google has a way around this. While the first step on Google’s path to success was to make a search engine that gave better results, how they did advertising was just as important. At a time when everybody was desperate for web advertising, and sites were willing to accept annoying flash animations, pop-ups and pop-unders and even adware, Google introduced ads that were purely text. In addition, they had the audacity, it seemed, to insist that pay-per-click bidding advertisers provide popular ads people would actually click through. If people are not clicking on your ad, Google stops running it. They even do this if there are not other ads to place on the page. They had the guts to say, “We’ll sell pay per click, but if your ad isn’t good, we won’t run it.” Nobody was turning down business then, and few are now.
Sites of course don’t want to be paid per click, or a cut of sales. They want a CPM, and that’s about all they want, as long as the ads are otherwise a good match for the site. Per-click costs and percentages are just a means to figuring out a CPM. Advertisers don’t want to pay CPMs, they want to pay for results, like clicks or sales.
Google found a great way to combine the two. They offered pay per click, but they insisted that the clicks generate enough CPM to keep them happy.
The same will apply here. They will offer pay for performance, but those ads will be competing with bidders who are bidding pay-per-click. Google will run, as it always has, the type of ad that gets the highest results. If you bid pay per performance, and the PPCs are bidding higher, your ad won’t run. And even if there are not higher PPCs, if your ad isn’t working and convering into sales and generating revenue for Google, I suspect they will just not run it. They can afford to do this, they are Google.
And so they will get the best of both worlds again. Advertisers who can come up with products that can sell through ads will pay for actual sales, and love how they can calculate how well it does for them. Google will continue to get good CPMs, which is what they care about, and what Adsense partners (including myself) care about. And they will have eliminated clickfraud at least on these types of ads. Once again they stay on top.
(Disclaimer: I am a consultant to Google, and am in their Adsense program. If you aren’t in it, there is a link in the right-hand bar you can use to join that program. I get a pay for performance credit if you do. Unlike Google’s PPC ads, where Adsense members are forbidden by contract from encouraging people to click on the ads, there is no need for such strictures against pay for performance ads, in fact there’s evey reason to encourage it.)